The project

The Pontal Irrigation Project is located in the Municipality of Petrolina, in the semi-arid region of the state of Pernambuco in Northeastern Brazil (São Francisco river valley). The Petrolina region already exports over US$ 100 million in fruit per year, largely from land under irrigation. Pontal’s location has already established logistics infrastructure for exports including three ports and highways in working condition. In addition, Petrolina’s airport, approximately 40 km away from Pontal, is already handling cargo planes shipping fruit overseas.

The project has a total area of 33,526 hectares, of which 7,717 are irrigable land. The Legal Reserve (6,705) has already been defined and implanted and the difference is composed of non-irrigable land. The Government has built a significant portion of the common irrigation infrastructure for the project.

Pontal represents an attractive opportunity for infrastructure development companies to engage in a long-term concession to build and operate irrigation infrastructure in Brazil’s fast-growing agribusiness sector. It also represents a unique opportunity for agribusiness investors to position themselves in a region with advantageous conditions for fruit production in terms of climate and water availability and with an established logistics chain for export to international markets.

The Investment Opportunity

The Government of Brazil, through its agency CODEVASF*, decided to transfer the land of the Pontal Project to the private sector for development into intensive irrigated agriculture aeas through a Public-Private Partnership (PPP).

As part of this PPP, the private sector must finish construction, operate and maintain common infrastructure, and allocate land to agribusiness users, who will have freedom in the selection of crops. The land will be transferred to the bidding winner at no cost and the concessionaire will have two main responsibilities: occupy the land in a maximum of 6 years from the signature of the contract, and make sure that the agribusiness users will allocate at least 25% of the irrigable land to small farmers who will be integrated to the production chain of the agribusiness user.

The estimated capex to conclude the construction of the common infrastructure is approximately US$ 50 MM. The private partner will be remunerated by the sale of water (tariffs to be paid by users) and the payment of a Government contribution (“Contraprestação”). The initial price of these tariffs will be set by the Government in the bidding documents“Edital de Licitação”.

* Companhia de Desenvolvimento dos Vales do São Francisco e do Parnaíba.